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Obama's gun control efforts boost firearm sales

The debate over firearms has ignited a wave of emotions and political rhetoric over the past several months, but the current administration is still proving to be the best thing to happen to gun sales since

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Obama's gun control efforts boost firearm sales

Eric McWhinnie, Wall St. Cheat Sheet
2:54 p.m. EDT May 5, 2013

A convention attendee tries out a handgun on display at the Smith & Wesson booth at the National Shooting Sports Foundation's Shooting, Hunting and Outdoor Trade Show in Las Vegas.(Photo: Ethan Miller, Getty Images)

The White House unintentionally is proving to be the best thing to happen to gun sales in decades.

In late April, Sturm Ruger (RGR) reported first-quarter results that exceeded targets. Net sales for the largest publicly traded gun manufacturer surged 39% to $155.9 million, compared to $112.3 million a year earlier.

The gun maker's earnings came in at $1.20 per share, up from 79 cents per share in the same period last year. Analysts on Wall Street were expecting earnings of $1.01 per share with revenue of $112.3 million, according to Thomson Reuters.

New products, such as LC380 and SR45 pistols, boosted sales, but the company said the recent gun control debate is the main driver of rising sales.

During the first quarter of 2013, background checks through the National Instant Criminal System, considered a proxy for retail gun demand, jumped 46%, according to Sturm Ruger.

Gun maker Smith & Wesson (SWHC) says background checks in February, while down from a month earlier, were 29.1% higher than the same month in 2011.

Gun sales typically receive a boost when a Democrat inhabits the White House, but firearms and ammo sales have surged to record highs after the December tragedy in Newtown reinvigorated debate about gun control.

Sturm Ruger can not make guns fast enough to satisfy growing demand. Itsbacklog climbed to 2.1 million orders in the first quarter vs. 337,000 order in the same period a year earlier.

Ruger had to limit incoming orders from independent distributors to reduce the growth in its backlog, which hit 1.5 million orders at the end of 2012, or roughly nine months of production.

In a regulatory filing, Ruger said: "Demand for the company's products in the first quarter of 2013 was very strong. We believe this strong demand for our products was primarily due to the current political environment that favorably impacted the entire firearms industry."

In January, President Obama and Vice President Joe Biden rolled out a wide-ranging list of executive actions aimed at strengthening gun control. As a result, many people say they are making purchases ahead of any major legal reforms. In fact, many people say Obama may end up being the best gun salesman in history.

Obama continues to press Congress to ban military-style assault weapons and ammo capacities of more than 10 rounds, to require background checks on all gun sales, and to create tougher penalties for anyone selling guns to people who are not legally allowed to own them.

After months of heated and emotional rhetoric, a bipartisan bill aimed at expanding the system of background checks failed in the Senate. It received 54 votes, six votes short of the 60 needed to advance.

Breaks from party lines impacted the bill's prospects. Five Democrats voted against it, and broke from party lines and voted against the bill. And only four GOP senators voted in favor of the bill. The Senate also blocked a proposal to ban semi-automatic rifles and high-capacity ammunition magazines.

A visibly angry Obama gave a speech shortly after the Senate's decision. He said: "This was a pretty shameful day for Washington. But ... I want to make it clear to the American people we can still bring about meaningful changes that reduce gun violence, so long as the American people don't give up on it. Even without Congress, my administration will keep doing everything it can to protect more of our communities … but we can do more if Congress gets its act together."

Some companies responded to public opinion polls showing support for stronger gun control laws. In January, Wal-Mart (WMT), one of the largest gun sellers in the U.S. placed a limit on ammunition sales of three boxes per customer, per day.

Gun sales had been on the rise before the Newtown shooting, in which a lone shooter killed his other, then mowed down 20 children and six adults at an elementary school before turning the gun on himself.

According to a gun industry analysis by The Associated Press, in Obama's first four years in office, the federal government conducted roughly the same number of background checks for gun owners and prospective buyers as it did under George W. Bush's first six years in office.

And for the first time since 1993, the number of federally licensed retail gun dealers in the U.S. increased in 2010 and 2011, adding 1,167 more licensed dealers.

Little wonder shares of gun makers continue to outperform the broader market. The past three years, Ruger shares have tripled in price, while Smith & Wesson shares have more than doubled. Shares of Cabela's (CAB), one of the most well-known outdoor recreation brands in the world, have more than tripled since 2010.

A view of a .45 semi-auto handgun on display at the National Rifle Association Annual Convention on May 4 in Houston. The NRA opened its annual convention May 3 in combative style, positioning itself as champion of American freedoms in the face of growing pressure for tougher gun laws. (Photo: Karen Bleier, AFP/Getty Images)

An young attendee inspects an assault rifle. More than 70,000 people are expected to attend the three-day annual meeting that features nearly 550 exhibitors, gun trade show and a political rally. (Photo: Justin Sullivan, Getty Images)

A visitor passes the Smith and Wesson handgun booth at the 2013 NRA Annual Meeting and Exhibits event at the George R. Brown Convention Center on May 3 in Houston. (Photo: Justin Sullivan, Getty Images)